Merafe reports big decline in annual output


Merafe reports big decline in annual output


Published Date: 2021-01-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Merafe reports big decline in annual output

The company, which shares in a joint venture with Glencore, says production was impacted by Covid-10, weak markets and electricity constraints.

Merafe Resources has reported a big decline in annual output as it cut back on production due to Covid-19, weak market conditions and electricity constraints.

In a fourth-quarter production report, the company said production fell 8% to 97,000 tonnes in the three months to end-December, resulting in an annual decline of 29% to 265,00 ounces.

Merafe's main source of revenue and earnings is its stake in the Glencore Merafe Chrome Venture, which is one of the global market leaders in ferrochrome production. Merafe shares in 20.5% of the earnings before interest, taxation, depreciation and amortisation (EBITDA) from the venture.

The company reported a loss for the six months to end-June after the joint venture was forced to close operations under the initial stages of the national lockdown. It said it was also impacted by ongoing cost pressure including unsustainably high electricity pricing. Global ferrochrome consumption declined due to weaker demand for stainless steel, while chrome ore exports also came under pressure. Apart from lower volumes of commodities sold, the slowdown in global economic activity resulted in lower prices for ferrochrome and chrome ore. It swung to a R961 million loss after taking into account depreciation and impairments of R1.34 billion.

Last month, it said the European benchmark ferrochrome price for the first quarter of this year had been settled at 117.5 US cents per pound, a 3.1% increase from the fourth quarter of last year.

Its shares fell 2.1% to 47c yesterday.


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